PowerWave Bankruptcy Further Delays D.C. Metro Wireless Expansion

Top wireless companies have accused struggling PowerWave Technologies Inc. of neglecting a monitoring system that watches over Washington’s underground metro system, where PowerWave has been in charge of installing wireless infrastructure to expand Internet and cell phone coverage within the system.

Sprint, T-mobile and AT&T warned Judge Mary Walrath of the U.S. Bankruptcy Court in Wilmington, Del., that PowerWave’s abandonment of the unfinished project has created “an unnecessary risk to public safety and welfare,” according to court papers.

Not only has PowerWave stopped work and skipped subcontractor payments, the wireless carriers said, but the company told a subcontractor to ignore an intrusion alarm that went off at the Rosslyn, Va., Metro station. Wireless carriers said in court papers that, under a 2009 agreement, PowerWave is supposed to investigate alarms “immediately” and fix the problem “in a timely manner.”

The wireless carriers said that the company is also in charge of making sure riders at the completed stations have working Internet and of maintaining the new infrastructure to support the system, according to court papers.

At a hearing on Friday, the carriers said they’ve come up with a deal to pay the cost of running the monitoring and maintenance operation while the company and the carriers work toward a transition of the wireless expansion project out of Powerwave’s control. Attorneys for Powerwave said the company supports the carriers’ transition plan.

The D.C. Metro system, which carries roughly 800,000 passengers each weekday, is the nation’s second-largest behind New York City’s subway system. A spokesman for the Washington Metropolitan Area Transit Authority, which runs the system, said in an email that WMATA is “monitoring the proceedings and will ensure that the safety of Metro customers is maintained at all times.”

Earlier this month, PowerWave asked Judge Walrath for permission to walk away from the Metro project, calling it “unprofitable.” They said that the wireless carriers haven’t paid them for $25 million in cost overruns—an expense that the carriers might challenge.

The wireless companies hired PowerWave to install equipment that would run a wireless signal throughout the Metro’s 50 stations, a project powered by money from the federal Passenger Rail Investment and Improvement Act of 2008. The carriers said that PowerWave shouldn’t be able to walk away from their agreement without coming up with a transition plan, turning over monitoring and subcontractor vendor information and leaving behind spare parts for maintenance of the system.

PowerWave’s failure to do that already has “injure[d] the carriers, subcontractors, [WMATA], the U.S. Congress, U.S. tax payers, D.C. Metro passengers and others,” the wireless carriers said in court papers.

PowerWave’s financial problems will likely delay the effort to install wireless service to all metro stations even more, though the carriers wouldn’t specify how long the project will take to complete. Wireless service has been completely installed at only the business stations, and Metro leaders recently asked Congress to push back the deadline to finish the project—which expired in October—by several years.

“Despite PowerWave’s bankruptcy filing, the carriers remain focused on the work to install the equipment needed to deploy the system in the tunnels for our customers as quickly as possible,” said Verizon spokeswoman Melanie Ortel in an email, who spoke on behalf of the carrier group. “PowerWave’s recent bankruptcy filing and request to terminate its contract with the carriers makes it difficult to predict a completion date at this time.”

PowerWave filed for bankruptcy on Jan. 28. The company is planning to auction its assets on April 8.

About Bankruptcy Beat

From Dow Jones Daily Bankruptcy Review, exclusive coverage of corporate bankruptcies, companies headed for trouble and the latest trends in bankruptcy law, distressed investing and corporate restructuring. Lead writer Pat Fitzgerald and Daily Bankruptcy Review reporters in Washington, New York and Wilmington, Del., provide insight into the big cases, who’s next to fall and what’s making news across the bankruptcy market.